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Fortune on Linux

Today Linux has become the hottest thing in corporate America since e-mail and maybe even Windows itself. Yes, most of the Linux IPOs are out of business or on the verge of going bust. Yes, few really believe Linux will ever replace Windows on the desktop. But on the back end, on servers in data centers rather than PCs on desktops, companies like Boeing, Amazon.com, E*Trade Financial, DreamWorks, Google, and virtually every major Wall Street firm have either finished reconfiguring big chunks of their servers to run Linux or are in the process of doing so. General Motors says it is likely to do the same in a year or so. Even the Chinese and German governments, along with about two dozen other countries, are taking a look at how they can save money by using Linux in their infrastructures.

This conversion is already causing reverberations throughout the high-tech world. For the year ended June 30, the number of servers sold with Linux as the operating system grew 18%, while those sold with Windows grew only 3% and those sold with Unix fell 7%, according to research group IDC. IBM says that contracts for its Linux integration and support services now number around 800, compared with 95 only 15 months ago. And Dell and HP say they will sell 15% to 18% of their servers this year with Linux preinstalled, up from less than 10% last year.

Indeed, Linux may bring about the greatest power shift in the computer industry since the birth of the PC, because it lets companies replace expensive proprietary systems with cheap commodity servers. This is scariest for Sun, which makes almost all its money by selling proprietary hardware and software; many of those systems are being replaced by Intel machines running Linux. Microsoft must worry too, since Linux blunts its biggest selling point to corporate IT managers: price. Because its Windows software runs on Intel hardware, corporate systems built around Microsoft programs are typically cheaper than systems from HP, IBM, and Sun. But Linux runs on Intel hardware, too, and Linux is free. Microsoft most certainly is not.

From a related article entitled Linux’s Siblings: “When the problems are smaller and the benefits diffuse, though, the status quo will reign. Home PC users just don’t have the clout to induce PC makers to dump Windows. Sure, corporations could save millions by replacing all their Microsoft desktop licenses, but it’s doubtful the cost savings merit the hassle factor. Would you want your support staff inundated with calls from people confused by a new system? Probably not.”